Why are landlords rushing for the exits while rents are so high?

[AlbacoreA]

Some of the landlords in Ireland with one property are accidental landlords. They never wanted to become landlords but their time of purchase, the subsequent financial crash and making starting a family (kids arrived etc) forced their hand.

They now have the chance, even if it's just breaking even to get out and have less hassle in their lives.

Important to remember, that they might be breaking even, but cash flow wise, the property/rental could in all likelihood have been a drain on their cash flow. A property with a mortgage of say €1200 a month and it was rented for say €1,600 a month. That €1,600 a month might have €300 expenses a month between insurance, property tax, management fees etc. The tax man at 50% would be taking say another €600-€650 a month, so the landlord/family owning the property are getting €650-€700 into their hand but paying out €1200 a month on the mortgage. So keeping the property/rental is "costing" them €500 a month.

Yes, I know people will say they are paying down capital and will be left with an asset, but these people never wanted to be landlords in many instances to begin with, so they would rather have the extra €500 in their pockets each month at a time in their lives when they may have childcare expenses, holidays, enjoying life with kids etc.

The conversation you're replying to was LL having doubled the value of the property are getting out. There would be no mortgage, and the value of the property is still rising. There would be no cashflow issue.

 

[AlbacoreA]

I would consider 26% of small landlords intending to leave the market within the next five years as frightening. If you consider that to be small, consider that this represents over 50,000 rental properties.

If lending is showing about a 1000 landlords buying property each year, in five years time there'll be 45,000 less rental properties available.

I just hope those tenants in these 45,000 properties buy property on the next five years and there is no other persons hoping to rent a property in the next five years. Once that happens, there's nothing to worry about.

We have no idea if the rental stock has increased or decreased. Available to rent is a different thing entirely. We keep getting these figures piecemeal (like how many LLS have left) and without context, in the bigger picture. For are those coming in have multiple properties, or do they mostly have one.

 

[AlbacoreA]

So having read through the RTB report here: https://www.rtb.ie/images/uploads/Comms and Research/RTB_Small_Landlord_Report_July_2021.pdf

Page 105:

Future Intentions Overall, the proportion of landlords likely to sell property in the next one to five years is small – 26% of landlords said they were ‘likely/very likely’ to sell a property within the next five years. This suggests that small landlords are unlikely to exit the sector in large numbers in the short to medium term. Amongst landlords that are ‘likely/very likely’ to sell a property, the main reason given was that they ‘no longer wish to be a landlord’ (45%). Other reasons relate to profitability – ‘being a landlord is not profitable for me’ (30%) and tax - ‘taxation is too high on rental income’ (25%). One in five (19%) landlords said ‘I am retiring and my properties are my pension’ and 13% mentioned ‘the regulatory environment for landlords’. Amongst landlords that are ‘likely/very likely’ to sell a property, fewer than one in four (23%) have taken any action with regard to selling their properties. The proportion of small landlords likely to purchase another property with the intention of letting it out in the next one to five years is very small – 6% of landlords said they were ‘likely/very likely’ to purchase another property within the next five years. This suggests that only a small proportion of these landlords are likely to expand their property portfolio in the short to medium term. The expansion of the sector is therefore unlikely to be facilitated by existing small landlords. The threat of landlords reclaiming rental property is a recurring worry for tenants. Fortunately, the proportion of landlords likely to reclaim a rental property in the next one to five years for use by themselves or their family is small – 19% of properties are ‘likely/very likely’ to be reclaimed within the next five years.

My interpretation of this is the vast majority (74%) of small landlords are not rushing to exit the market

I have no idea if those figures are representative of the market. I have no idea what the normal churn of the market is. I have no context for these figures as how it relates to the available properties to rent. It could be stock is hoovered up by returning emigrants, staff working in Tech and Finance etc. Who knows. The RTB seems to be implying there isn't a shortage due to LLs leaving.

Their systems are chaotic. Half the time they can't find my records, or payments. I should trust their stats? Hardly.

 

[PebbleBeach2020]

Did you read the methodology the report is based on? Did you read the report? I'm assuming by your postings that you did neither.

 

[AlbacoreA]

My suggestion to you AlbacoreA would be to get out there, and delve into the market. If you've got €3 to €400,000.00, or the facility to borrow the equivalent, buy a property, and start from there. Come back to us in around 14 months and let us know how you're getting on. I've no doubt your story will be slightly different from others, but not by a lot. The end result will be very similar. You'll also see why there's no one off answer to the question of why people with property to let are leaving the market. A bit like learning to play poker? You need to sit into a game and hey presto? You'll learn fierce fast.

Since I've just got out after many years in the market, that would seem a retrograde step.

 

[AlbacoreA]

Did you read the methodology the report is based on? Did you read the report? I'm assuming by your postings that you did neither.

No its massive. Maybe you could point me where it shows the relationship between total rental stock, stock available to rent and how it related to LL leaving and churn.

From a quick glance it seems negative experiences are a tiny % and the tny numbers of leaving are because they just want to.

This section of the report presents the findings from seventy-four (74) short telephone interviews that were conducted with landlords who left the private rental sector and were no longer operating as landlords. The purpose of these interviews was to identify the reasons that these landlords ceased to operate as landlords in the sector. The majority (80%) of these former landlords let out one property. A small proportion (8%) rented out two or more properties and 12% said they didn’t know how many properties they previously rented out

When asked what would have made them consider not selling their properties, the majority (57%) of landlords said ‘nothing – wanted to sell for personal reasons’. However, a smaller proportion of landlords mentioned ‘greater profit’ (13%), ‘less taxation’ (11%) and ‘less unfavourable regulation’ (8%) (Figure 2.74).

Would you say this report reflects the opinions of this thread or disagrees with it.

 

[Brian C]

I would suggest that one of the main reasons for a landlord cashing in now is the high prices achievable for properties. So for a landlord who bought a property in the early 2000's he/she would have paid quite a high price for the property. Following the bank collapse not only did rents collapse but so did property values. This left many landlords staring into a financial abyss for a number of years. Now after slowly building up the rental income they have seen their property's value shoot up. After all the pain they see this as an appropriate time to cash in. The chances are that they will have lost a small fortune over the years but at least with property prices going up they will have done substantially better than a handful of years ago.

 

[ashambles]

If you've a few hundred thousand sitting in a bank account and you're not investing it in a rental - then your reasons for doing that might be similar to landlords exiting.

With my savings it's cash and warily trickling it into the stock market or maxing my pension.

In theory buying property, earning maybe 3% after tax from rent, as well as capital appreciation should be attractive but it's not. For me it's less attractive that earning 0% and losing money to inflation.

My reasons would be in order of importance
- stories of nightmare tenants
- constant landlord vilification by media
- incoming government likely to make ham-fisted populist changes

 

[AlbacoreA]

Prices have gone up in the last couple of years though and are likely to keep going up. If you wanted to make money on capital increases as the sole reason for getting into renting, then it's not a good time to sell up.

I thought I saw how long LLs have owned a property in that report. Can't find it this morning. Anyone else find it.

 

[Leo]

We have no idea if the rental stock has increased or decreased

Decreasing levels of rental stock has made headlines a number of times over the past few years, example.

 

[AlbacoreA]

Is that stock or just available to rent.

 

[AlbacoreA]

What's the trend for total number of tenancies. Not just new registrations.

 

[Lockup]

I would suggest that one of the main reasons for a landlord cashing in now is the high prices achievable for properties. So for a landlord who bought a property in the early 2000's he/she would have paid quite a high price for the property. Following the bank collapse not only did rents collapse but so did property values. This left many landlords staring into a financial abyss for a number of years. Now after slowly building up the rental income they have seen their property's value shoot up. After all the pain they see this as an appropriate time to cash in. The chances are that they will have lost a small fortune over the years but at least with property prices going up they will have done substantially better than a handful of years ago.

Accidental LL. Sold 2 years ago. Main Reason, not being able to get my property back if I needed it i.e. overholding.

It should be noted although accidental I would happily have stayed as a LL if the government hadnt locked me into below market rates and most importantly my rights as a property owner and my ability to get an overholding tenant out in a timely fashion were respected.
Note: while my property was rented, I was also renting. Anti LL legislation is bad for tenants also as I found out from the other side when my LL sold up.

 

[PebbleBeach2020]

What's the trend for total number of tenancies. Not just new registrations.

Is that stock or just available to rent.

Prices have gone up in the last couple of years though and are likely to keep going up. If you wanted to make money on capital increases as the sole reason for getting into renting, then it's not a good time to sell up.

I thought I saw how long LLs have owned a property in that report. Can't find it this morning. Anyone else find it.

No its massive. Maybe you could point me where it shows the relationship between total rental stock, stock available to rent and how it related to LL leaving and churn.

Read the report, it's interesting and judging by the number of posts you have put in this thread, it's subject matter is something that you feel strongly about. I read the report and found it very insightful. The methodology explains the number of participants which is very representative of landlord populations from all the information provided. The 26% of landlords selling up in the next five years is an estimate based on feedback from the surveyed sample. This could go up or down, but I'd say the margin is probably 22 - 30% of landlords selling up with 4% margin of error allowed.

 

[noproblem]

In theory buying property, earning maybe 3% after tax from rent, as well as capital appreciation should be attractive but it's not. For me it's less attractive that earning 0% and losing money to inflation.

"In theory", being the appropriate words.

 

[AlbacoreA]

Read the report, it's interesting and judging by the number of posts you have put in this thread, it's subject matter is something that you feel strongly about. I read the report and found it very insightful. The methodology explains the number of participants which is very representative of landlord populations from all the information provided. The 26% of landlords selling up in the next five years is an estimate based on feedback from the surveyed sample. This could go up or down, but I'd say the margin is probably 22 - 30% of landlords selling up with 4% margin of error allowed.

I've been browsing it.

I'm open to correction but for me. It describes a functioning market with a normal LL churn of about 20%. Only LLs leaving are overly negative about the market. Which I suppose it's why they are leaving.

 

[PebbleBeach2020]

I'm open to correction but for me. It describes a functioning market with a normal LL churn of about 20%. Only LLs leaving are overly negative about the market. Which I suppose it's why they are leaving.

I don't think any rental market is functioning normal as you describe it if the churn rate is 20 - 30% over a five year period. All the more so when the new entrant rate is 1/10th of the exit rate (i.e. 50,000 landlords leaving within five years and 5,000 new landlords coming into the rental sector).

 

[AlbacoreA]

My point is that the impression you get from the RTB.

Depends if the new LL have more properties or rooms than the ones leaving and if the demand is the same or increasing/decreasing.

 

[LS400]

Why are landlords rushing for the exits while rents are so high?​

I have just closed on a 2 bed in a reasonably nice area of Dublin.

There's not a chance in hell I would have borrowed to acquire the property. To me, those days are well and truly over, which, is not a good story, although some will see it as a victory for struggling home buyers. Its very short sighted, and the big firms, which breezed in to the rental market saw a massive opening, and that's not a good story.

There is a lot of money out there, and a so long as your not going into debt for it, I still think its a good return, even with the horrendous way good property owners who rent their place, are treated by bad tenants, who, have no fear of reprisals.

Unfortunately, I don't think this will get better any time soon. I would recommend selling up in this dysfunctional market, which has been pillaged by political interference, to anyone even close to their origional purchase value.

 

[PebbleBeach2020]

Why are landlords rushing for the exits while rents are so high?​

I have just closed on a 2 bed in a reasonably nice area of Dublin.

There's not a chance in hell I would have borrowed to acquire the property. To me, those days are well and truly over, which, is not a good story, although some will see it as a victory for struggling home buyers. Its very short sighted, and the big firms, which breezed in to the rental market saw a massive opening, and that's not a good story.

There is a lot of money out there, and a so long as your not going into debt for it, I still think its a good return, even with the horrendous way good property owners who rent their place, are treated by bad tenants, who, have no fear of reprisals.

Unfortunately, I don't think this will get better any time soon. I would recommend selling up in this dysfunctional market, which has been pillaged by political interference, to anyone even close to their origional purchase value.

Did you sell or buy? I'm assuming you sold as you are advising people to sell up and exit the market.